ROCOR INTERNATIONAL, INC. f/k/a Donco Carriers, Inc., Petitioner, v. NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA, Respondent.
No. 99-0673.
Supreme Court of Texas.
May 23, 2002.
Rehearing Overruled July 3, 2002.
Gerald D. McFarlen, San Antonio, Thomas F. Nye, Corpus Christi, Brin & Brin, Thomas C. Wright, The Wright Law Firm, Lydia S. Zinkhan, Campbell Harrison & Wright, Houston, William V. Dorsaneo, III, Dallas, for Respondent.
Justice O‘NEILL delivered the opinion of the Court, in which Chief Justice PHILLIPS, Justice ENOCH, Justice JEFFERSON, and Justice RODRIGUEZ joined.
In this case, an insured sued its excess liability carrier for costs that it incurred in defending a lawsuit while the insurer delayed settling the claim. We must decide whether article 21.21 of the Texas Insurance Code affords the insured a cause of action for unfair claim settlement practices1 and, if it does, we must define the action‘s legal elements. A divided court of appeals concluded that the insured could not assert a claim under the statute, and that the evidence did not support recovery on the insured‘s alternative misrepresentation theory. 995 S.W.2d 804, 806. But the court held that the insured could recover under a common-law negligence theory, and rendered judgment on the jury‘s negligence finding. Id.
We hold that the insured may assert a claim under
I. Background
Ralph Mueller was a driver for Rocor International, Inc., a trucking company. One evening in May 1989, after consuming a considerable amount of alcohol at a bar, Mueller swerved his truck off the road and struck two highway patrol officers who had stopped another drunk driver by the side of the road. Both officers were killed. Mueller, whose blood alcohol concentration tested 0.16, was arrested and charged with two counts of involuntary manslaughter. Several months later, the officers’ families sued Rocor.
Rocor carried a $1 million primary liability policy issued by Guaranty National Insurance Company, with a $1 million self-insured retention endorsement. Rocor was also insured under an $8 million umbrella policy issued by National Union Fire Insurance Co. of Pittsburgh. Both policies placed the duty to defend on Rocor. The National Union policy also obligated Rocor to cooperate with National Union in settling claims.
Soon after suit was filed, Rocor‘s attorney, Terrence Martin, began investigating the accident. Martin quickly determined that Rocor would probably be found liable. Mueller claimed that he was not driving the truck when the accident occurred. He claimed that some unknown person had entered the truck and driven away while he was sleeping in the back. The alleged unknown person was never located, however, and Mueller had been apprehended fleeing the accident scene on foot; thus, Martin did not believe Mueller‘s story was credible.
Martin concluded that Rocor faced significant liability, especially if the case went to trial. Rocor‘s vice president for safety and risk management, Angel Arzaga, agreed, and directed Martin to begin settlement negotiations. As early as June 1989, the plaintiffs’ attorney, Charles Soechting, informed Martin that he considered this a “policy limits” case ($10 million), but indicated that he might be receptive to some form of structured settlement. In January 1990, the case was set for mediation.
Meanwhile, National Union was advised that liability would likely reach the excess coverage layer. National Union decided to take charge of the settlement efforts, as its policy allowed, and canceled the scheduled mediation. It also directed that no offer was to be made to the plaintiffs at that time. From that point on, National Union‘s attorney, Stanley Renneker, assumed control of the settlement negotiations.
Over the next fourteen months, the parties exchanged a number of settlement propositions for widely varying amounts. In April 1990, Renneker met with Soechting to discuss settlement. After that meeting, Martin wrote to Arzaga and Guaranty National:
Concerning settlement, I am pleased to announce that there has finally been some progress in this area. Stanley Renneker, attorney for National Union Fire Insurance Company, met with Mr. Soechting on Wednesday, April 11, 1990. Mr. Soechting requested a structured settlement worth 4.5 million dollars which in my opinion is fairly reasonable and amounts to an 8 million dollar reduction in his initial demand. Mr. Renneker responded to this demand on the following Friday offering a structured settlement worth $2,848,267.00 and is awaiting Mr. Soechting‘s response.... [G]iven the “relative” closeness of the parties (2.8 v. 4.5), and Mr. Soechting‘s strong desire to settle this case, Mr. Renneker believes this case, if it is going
to settle, will settle by the end of the month.
Soechting‘s $4.5 million offer was orally communicated, and he later testified that it was intended to settle only the adults’ claims, not the children‘s. Soechting testified that he was then willing to settle the children‘s claims for $1.8 million and all of the claims for $6.3 million, and that he believed he communicated this to Renneker. However, Martin testified that he understood from Renneker that Soechting‘s $4.5 million offer was for the entire case, and he was not aware of any offer to settle the children‘s claims separately until several months later in September.
Soechting‘s only written settlement offer was made in a May 4, 1990 letter to Martin and Renneker, which stated: “[W]e will settle this case now for the sum of $10,000,000.00. The plaintiffs will consider a structured settlement having a present value of $10,000,000.00.” Martin and Soechting testified that they did not consider $10 million to be a serious offer but merely an attempt by Soechting to “Stowers-ize” Renneker and pressure him to respond with an offer within total policy limits. See G.A. Stowers Furniture Co. v. American Indem. Co., 15 S.W.2d 544 (Tex. Comm‘n App. 1929, holding approved). A few days later, Arzaga sent a letter to National Union that referred to a $7.5 million settlement demand by Soechting. He also referred to a June 4th letter from Martin to Arzaga that mentioned a $3.8 million settlement offer by National Union. Over the summer, though, the distance between the parties’ respective settlement offers appears to have widened. On August 20th, Martin wrote to Arzaga, with copies to Guaranty National, National Union, and Renneker, reporting that the plaintiffs’ settlement demand was $9 million and that Renneker had offered $3.2 million.
In December 1990, the children‘s claims settled for $1.8 million. The remaining claims went to mediation at least twice, and Soechting‘s demand for those claims was $5 million. Renneker offered $3.8 million. The adults’ claims finally settled in March 1991 for $4.6 million.
Rocor filed this suit against National Union to recover attorney‘s fees and costs that it incurred as a result of National Union‘s alleged failure to promptly effectuate settlement. Rocor claimed that National Union was negligent, and that it violated
The court of appeals, sitting en banc, reversed the trial court‘s judgment. Three justices believed that Rocor could assert causes of action for both common-law negligence and for unfair claim settlement practices under
Both Rocor and National Union filed petitions for review. Rocor, having elected to recover under
II. Article 21.21
A. The Statute‘s Application
Rocor has elected to recover under
Any person who has sustained actual damages as a result of another‘s engaging in an act or practice declared in Section 4 of this Article or in rules or regulations lawfully adopted by the Board under this Article to be unfair methods of competition or unfair or deceptive acts or practices in the business of insurance ... may maintain an action against the person or persons engaging in such acts or practices.
Section 16(a) allows insureds to pursue claims for conduct declared unfair in rules or regulations adopted by the State Board of Insurance under
In Watson, we refused to extend Vail to allow a third-party claimant to sue the defendant‘s insurer for not settling a liability claim against its insured. Allstate Ins. Co. v. Watson, 876 S.W.2d 145, 147-50 (Tex. 1994). We emphasized that the Legislature had specifically refused to create such a cause of action under the statute, and distinguished the unfair settlement practice in Vail as one that arose in the context of the special relationship between an insured and its insurer. Id. at 149. Because a third party to the insurance contract enjoys no such special relationship, we refused to confer upon Watson, a third-party claimant, the rights and remedies of an insured:
A third party claimant has no contract with the insurer or the insured, has not paid any premiums, has no legal relationship to the insurer or special relationship of trust with the insurer, and in short, has no basis upon which to expect or demand the benefit of the extra-contractual obligations imposed on insurers under art. 21.21 with regard to their insureds.
Id. Our holding in Watson was consistent with the remedial purposes underlying
National Union suggests that we resolved the issue presented in this case against the insured in Garcia. There, an insurer had refused to settle a medical malpractice suit against its insured on the ground that the plaintiffs’ claims were not covered by the policy. Garcia, 876 S.W.2d at 845. The plaintiffs settled with the physician, agreeing to enforce the judgment they obtained against him only against his insurer, and taking an assignment of his rights against the insurer. Id. The plaintiffs then sued the insurer solely as its insured‘s assignees, alleging that its failure to settle was negligent and violated
National Union points to language in Garcia that it claims suggests that an insured has no cause of action against its insurer under
When construing statutes, our ultimate purpose is to ascertain the Legislature‘s intent. Fitzgerald v. Advanced Spine Fixation Sys., Inc., 996 S.W.2d 864, 865 (Tex. 1999). In determining that intent, we may look to the statute‘s underlying purpose.
B. The Statutory Liability Standard
National Union claims that there is no evidence to support the jury‘s finding that it is liable under the statute for engaging in unfair claim settlement practices. But before we can conduct a meaningful evidentiary review, we must first define the statutory liability standard against which to measure the evidence. An insurer faces
1. Reasonably Clear Liability
Neither the Insurance Code, nor the rules or regulations the Board has adopted thereunder, articulate when liability has become reasonably clear for purposes of triggering the insurer‘s duty to reasonably attempt settlement under the statute. National Union claims that, by failing to define a standard, the Legislature must have intended the common-law Stowers standard to apply. There is nothing to indicate that the Legislature had in mind any standard other than the familiar Stowers standard, and certainly there was merit to unifying the common-law and statutory
Under the common law, an insurer generally has no obligation to settle a third-party claim against its insured unless the claim is covered under the policy. See Farmers Tex. County Mut. Ins. Co. v. Griffin, 955 S.W.2d 81, 82 (Tex. 1997). Nor is an insurer obligated to indemnify its insured for a third-party claim on which the insured is not liable. Cf. Linkenhoger v. American Fidelity & Cas. Co., 152 Tex. 534, 260 S.W.2d 884, 887 (1953) (holding that insured‘s Stowers claim against insurer did not accrue until insured‘s liability was finally adjudicated), overruled in part on other grounds by Street v. Second Court of Appeals, 756 S.W.2d 299 (Tex. 1988), Hernandez v. Great Am. Ins. Co. of N.Y., 464 S.W.2d 91 (Tex. 1971). These well-established common-law precepts, which reflect the parties’ expectations in contracting for insurance, inform our determination of the scope of the duty the Legislature imposed. Accordingly, we hold that to trigger an insurer‘s statutory duty to reasonably attempt settlement of a third-party claim against its insured, the policy must cover the claim and the insured‘s liability to the third party must be reasonably clear. In this case, National Union does not dispute coverage under the policy, nor does it claim that Rocor‘s liability was not reasonably clear. Thus, these two elements of Rocor‘s statutory claim are satisfied. But National Union maintains that these elements alone are not enough to trigger an insurer‘s obligation to reasonably attempt settlement. It claims that the insured must also show that the plaintiffs made a proper settlement demand within policy limits that an ordinarily prudent insurer would have accepted.
In some jurisdictions, an insurer that has had a reasonable opportunity to determine that its insured is liable on a covered claim may incur tort liability for failing to settle even if the third-party claimant has not made a firm settlement offer. See, e.g., City of Hobbs v. Hartford Fire Ins. Co., 162 F.3d 576, 586 (10th Cir. 1998) (applying New Mexico law); First State Ins. Co. v. Utica Mut. Ins. Co., 870 F. Supp. 1168, 1176 (D. Mass. 1994) (applying Massachusetts law); Maine Bonding & Cas. Co. v. Centennial Ins. Co., 298 Or. 514, 693 P.2d 1296, 1303 (1985); Alt v. American Family Mut. Ins. Co., 71 Wis. 2d 340, 237 N.W.2d 706, 711-12 (1976); Rova Farms Resort, Inc. v. Investors Ins. Co. of Am., 65 N.J. 474, 323 A.2d 495, 505-07 (1974); State Auto. Ins. Co. of Columbus, Ohio v. Rowland, 221 Tenn. 421, 427 S.W.2d 30, 35 (1968). These jurisdictions generally reason that the lack of a firm settlement offer is merely evidence that a jury may consider in deciding the insurer‘s liability, and does not preclude a tort claim against the insurer. Rova Farms, 323 A.2d at 505; see also Rowland, 427 S.W.2d at 35.
But in Texas, the common law imposes no duty on an insurer to accept a settlement demand in excess of policy limits or to make or solicit settlement proposals. See Garcia, 876 S.W.2d at 849, 851. As we noted in Garcia, “[r]equiring the claimant to make settlement demands
We see no reason why an insurer‘s duty to its insured under
The dissent seems to take the position that liability is reasonably clear under the statute if the insured clearly caused the third party‘s injuries. But under that view of the statute, an insurer could be held liable for failing to settle even if the amount of the injured third party‘s damages were unknown or unclear. And our view of the statute is consistent with the statutory purpose the dissent identifies, because it is expressly intended to encourage swifter dispute resolution. See Garcia, 876 S.W.2d at 851 & n. 18.
In sum, we hold that an insurer‘s liability is not reasonably clear, and liability may not be imposed under
2. No Evidence Review
National Union claims that there is no evidence to support the jury‘s finding that it engaged in unfair claim settlement practices under
National Union does not dispute coverage under the policy, nor does it claim that Rocor‘s liability was not reasonably clear. Thus, we must determine whether there is any evidence that the claimant made a proper settlement demand within policy limits that was reasonable under the circumstances such that an ordinarily prudent insurer would have accepted it. As we have said, a proper settlement demand must clearly state a sum certain and propose to fully release the insured. See Garcia, 876 S.W.2d at 848-49. The record in this case reflects no such demand. The plaintiffs’ only written settlement demand was for $10 million, which was conveyed in a May 4, 1990 letter to Martin and Renneker. Rocor does not base its unfair
Rocor relies primarily upon Soechting‘s oral offer made to Renneker at the April 11, 1990 meeting. However, the record reveals great confusion about that offer‘s terms. At the meeting, Soechting requested a structured settlement worth $4.5 million. At trial, Soechting testified that he intended that figure to settle only the adults’ claims, and that he was willing to settle the children‘s claims for $1.8 million, for a total combined settlement of $6.3 million. Because the case ultimately settled for close to that amount nearly one year later, Rocor claims that National Union unreasonably delayed settlement and is liable for unfair claim settlement practices. But correspondence from Martin to Rocor contemporaneous with the April negotiations suggests that Renneker understood the $4.5 million offer was to settle all claims, including the children‘s. Although Soechting testified that he “believed” he communicated to Renneker that the offer‘s scope was limited, the record indicates that Renneker did not understand the terms of Soechting‘s proposal.
In Garcia, we stated that the Stowers remedy of shifting the risk of an excess judgment onto the insurer is not appropriate unless there is proof that the insurer was presented with a reasonable opportunity to settle within policy limits. Garcia, 876 S.W.2d at 849. We implied that a formal settlement demand is not absolutely necessary to hold the insurer liable, see id., although that would certainly be the better course. But at a minimum we believe that the settlement‘s terms must be clear and undisputed. That is because “settlement negotiations are adversarial and ... often involve[] hard bargaining by both sides.” Id. Moreover, the settlement process can be fluid and complex, as the negotiations in this case indicate. Given the tactical considerations inherent in settlement negotiations, an insurer should not be held liable for failing to accept an offer when the offer‘s terms and scope are unclear or are the subject of dispute. Soechting‘s oral proposal at the April 11th meeting did not clearly state the proposed settlement‘s terms, nor did it mention a release. Accordingly, there is no evidence that National Union was presented with a proper settlement demand, which is a prerequisite to
3. Liability Absent a Duty to Defend
National Union contends that, irrespective of Rocor‘s liability theory or the sufficiency of the evidence to support it, National Union cannot be liable for Rocor‘s defense costs because it had no duty to defend Rocor, and the Stowers duty is premised upon the insurer‘s control of the insured‘s defense. We disagree.
In Stowers, we held that an insurer that failed to use ordinary care could be liable for a judgment against its insured in excess of policy limit. Stowers, 15 S.W.2d at 546-47. While the insurer in that case, unlike National Union, had the duty to defend its insured, our decision was also based upon the insurer‘s control over settlement:
[T]he indemnity company had the right to take complete and exclusive control of the suit against the assured, and the assured was absolutely prohibited from making any settlement, except at his own expense, or to interfere in any negotiations for settlement or legal proceeding without the consent of the company; the company reserved the right to settle any such claim or suit brought against the assured.
Id. at 547 (emphasis added).
In this case, while National Union did not have a contractual duty to defend Ro
III. Alternative Recovery Theories
A. Misrepresentation
Rocor claims that it is entitled to recover under the jury‘s alternative finding that National Union made misrepresentations to Rocor during the settlement process. Specifically, Rocor claims that National Union, through Renneker: (1) represented in May 1990 that the case would settle by the end of the month, but then made no effort to settle; (2) did not disclose that, as early as April or May of 1990, Soechting had offered to settle the minors’ claims for $400,000 each; and (3) falsely represented in December 1990 that the case had been settled for $3.8 million. Because there was evidence to support the jury‘s alternative finding, Rocor argues, the trial court erred in granting a judgment n.o.v. on this claim. In response, National Union argues that
We agree with National Union and the court of appeals that there is no evidence that the alleged misrepresentations affected Rocor‘s trial preparation costs and thus caused it damage. Accordingly, without considering the misrepresentation claims’ legal underpinnings, we affirm the trial court‘s judgment n.o.v. insofar as it relates to Rocor‘s misrepresentation claims.
B. Negligence
Finally, National Union claims that the court of appeals erred in rendering judgment against it based on a negligence theory. National Union contends that Stowers defines an insurer‘s common-law duty to settle third-party claims against its insured, and that there can be no Stowers liability absent an excess judgment against the insured. On the other hand, Rocor argues that Stowers is merely a particularized aspect of ordinary negligence that does not preclude an insured from recovering damages caused by its insurer‘s negligent delay in effectuating a settlement.
Whether or not Rocor can recover delay damages under a common-law negligence theory based on the facts presented, which we do not decide, it must first establish that National Union was presented with a proper settlement demand within policy limits that an ordinarily prudent insurer would have accepted. As we have said, there is no evidence that National Union was presented with such a demand, and this failure of proof is fatal to Rocor‘s common-law claim.
IV. Conclusion
In sum, we hold that an insured may assert a cause of action against its insurer under
Justice HECHT delivered a concurring opinion, in which Justice OWEN joined.
Justice BAKER delivered a dissenting opinion, in which Justice HANKINSON joined.
Justice HECHT, joined by Justice OWEN, concurring in the judgment.
I can join in the Court‘s judgment but not in its opinion. The simple reason why National Union cannot be charged with the expenses Rocor incurred in defending itself against wrongful death claims after they should have been settled is because, as the Court concludes, there is no evidence that settlement should, or could, have occurred before it did. The most that can be said from the record in this case is that when the claimants’ lawyer testified in November 1995, years after the claims were settled, that he “believe[d]” that it was “more likely than not” that he would have accepted a $6.3 million offer in April 1990 if there had been “any communication” between the parties, even though his only written offer at the time was for the total insurance coverage of $10 million. A belief in the probability of a hypothetical based on facts that never occurred is not evidence.
So given this failure of proof, there is no good reason for deciding, theoretically, whether if Rocor had met its burden of proof it could recover under the version of
Although Garcia argues that this case is not solely a Stowers lawsuit because remedies under the Deceptive Trade Practices Act and TEX. INS. CODE art. 21.21 are cumulative of other remedies, and the judgment below is couched in terms of a violation of article 21.21, all of the jury issues that form the basis for the judgment against APIE in the Stowers case involve the breach of either the duty to defend or the duty to settle the malpractice lawsuit. Breach of the Stowers duty does not constitute a violation of article 21.21 or the DTPA. Moreover, APIE is not responsible for any separate DTPA or Insurance Code violation because the record in this case is devoid of evidence that APIE ever engaged in any unfair or deceptive act or practice as defined in the relevant statutes. See
TEX. INS. CODE ANN. art. 21.21, §§ 4, 16(a) (Vernon Supp. 1994). We hold that there was no violation of article 21.21.7
We specifically rejected Garcia‘s argument based on Vail v. Texas Farm Bureau Mutual Insurance Co.8:
Garcia contends that Vail ... support[s] his contention that jury findings to the effect that a failure to settle involves an unfair or deceptive practice should entitle him to recover under article 21.21. Vail, however, involved an insurer‘s bad faith refusal to pay a claim under a first-party property insurance policy. Vail, 754 S.W.2d at 130. A Stowers action, by definition, involves an insurer‘s duty to settle a covered lawsuit—a situation that can only arise under a third-party liability insurance policy. Thus Vail is inapposite.9
Plainly, Garcia limited Vail‘s applicability to first-party claims. This limitation is consistent with Vail‘s alternative holding that
The Court now dismisses these passages as no “indicat[ion] that we intended to limit an insured‘s statutory claims against its own insurer for unfair claim settlement practices to first-party insurance claims,”11 but if they do not both plainly say that an insurer has no statutory duty to settle third-party claims against its insured, then what do they say? No answer. It would be better to simply overrule Garcia as wrong than to pretend as if its words mean nothing. The Court cannot hold the Legislature strictly to the language of statutes and parties to the language of contracts and then fudge on the language of its own opinions. I doubt the Court would indulge a court of appeals’ opinion that said, well, yes, the Supreme Court did say such and so, but we don‘t think that was its intent. Yet the Court can hardly expect the lower courts to follow its opinions if it is so dismissive of them itself.
My point, though, is that it does not matter in this case what the Court‘s opinion in Garcia means or what the Court intended or whether it was right because
The dissent‘s position, which Rocor does not urge itself, is truly remarkable. According to the dissent, once liability becomes clear,
Justice BAKER filed a dissenting opinion, in which Justice HANKINSON joined.
[F]ailing to attempt in good faith to effectuate a prompt, fair, and equitable settlement of a claim with respect to which the insurer‘s liability has become reasonably clear.
Today, the Court interprets this statutory claim to mean:
[T]hat an insurer‘s liability is not reasonably clear, and liability may not be imposed under article 21.21, unless the insured shows that (1) the policy covers the claim, (2) the insured‘s liability is reasonably clear, (3) the claimant has made a proper settlement demand within policy limits, and (4) the demand‘s terms are such that an ordinarily prudent insurer would accept it.
See 77 S.W.3d 262. Does anyone see anything wrong with this interpretation? I do, and I dissent.
I. APPLICABLE LAW
A. STATUTORY DUTY TO ATTEMPT TO SETTLE
Any person who has sustained actual damages as a result of another‘s engaging in an act or practice declared in Section 4 of this Article or in rules or regulations lawfully adopted by the Board under this Article to be unfair methods of competition or unfair or deceptive acts or practices in the business of insurance ... may maintain an action against the person or persons engaging in such acts or practices.
State Board of Insurance Order No. 18663, adopted under
Notably, the 1995 amendments to
B. STATUTORY CONSTRUCTION
In construing a statute, our objective is to determine and give effect to the Legislature‘s intent. National Liab. & Fire Ins. Co. v. Allen, 15 S.W.3d 525, 527 (Tex. 2000); Liberty Mut. Ins. Co. v. Garrison Contractors, Inc., 966 S.W.2d 482, 484 (Tex. 1998). We must first look at the statute‘s plain and common meaning. Fitzgerald v. Advanced Spine Fixation Sys., Inc., 996 S.W.2d 864, 865 (Tex. 1999). This is because we presume the Legislature intended the plain meaning of its words. Allen, 15 S.W.3d at 527. If the statute is unambiguous, we typically adopt the interpretation the plain meaning of the statute‘s words and terms support. Fitzgerald, 996 S.W.2d at 865. Consequently, when a statute‘s language unambiguously establishes the Legislature‘s intent, we do not use extrinsic aids to find an intent the statute does not express. See Allen, 15 S.W.3d at 527; Fitzgerald, 996 S.W.2d at 865. Statutory construction issues are legal questions we review de novo. Johnson v. City of Fort Worth, 774 S.W.2d 653, 656 (Tex. 1989).
Courts must determine a statute‘s intent to give full effect to all its terms. Seay v. Hall, 677 S.W.2d 19, 25 (Tex. 1984). However, “[courts] are not the law-making body. They are not responsible for omissions in legislation.” Simmons v. Arnim, 110 Tex. 309, 220 S.W. 66, 70 (1920); see also RepublicBank Dallas, N.A. v. Interkal, Inc., 691 S.W.2d 605, 607 (Tex. 1985). Courts must enforce the laws as the Legislature enacts them, because, “when [courts] stray from the plain language of a statute, we risk encroaching on the Legislature‘s function to decide what the law should be.” Fitzgerald, 996 S.W.2d at 866.
C. JNOV STANDARD
A trial court may grant a motion for judgment notwithstanding the verdict if there is no evidence upon which the jury could have made the findings relied upon. Exxon Corp. v. Quinn, 726 S.W.2d 17, 19 (Tex. 1987); Dowling v. NADW Mktg., Inc., 631 S.W.2d 726, 728 (Tex. 1982); Dodd v. Texas Farm Prods. Co., 576 S.W.2d 812, 814 (Tex. 1979). In reviewing a trial court‘s judgment notwithstanding the verdict, we view all the evidence in a light most favorable to the party against whom the trial court entered the judgment, and we indulge “every reasonable intendment deducible from the evidence ... in that party‘s favor.” Dowling, 631 S.W.2d at 728; see also Exxon Corp., 726 S.W.2d at 19; Dodd, 576 S.W.2d at 814. When more than a scintilla of competent evidence exists to support the jury‘s findings, the reviewing court should reverse a judgment notwithstanding the verdict. Mancorp, Inc. v. Culpepper, 802 S.W.2d 226, 228 (Tex. 1990).
II. ANALYSIS
A. THE STATUTORY LIABILITY STANDARD
The pre-1995 version of
However, the Court‘s holding about the elements necessary to prove an insurer‘s unfair settlement practice is clearly wrong. See 77 S.W.3d at 260. In determining the statutory liability standard, the Court impermissibly leaps into the legislative realm and completely eliminates a duty and claim the Legislature expressly created. See Simmons, 220 S.W. at 70; RepublicBank Dallas, 691 S.W.2d at 607.
National Union contends that, because
Remarkably, the Court embraces National Union‘s position that the Stowers standard applies to the statutory claim raised here. Specifically, the Court holds that:
[A]n insurer‘s liability is not reasonably clear, and liability may not be imposed under article 21.21, unless the insured shows that (1) the policy covers the claim, (2) the insured‘s liability is reasonably clear, (3) the claimant has made a proper settlement demand within policy limits, and (4) the demand‘s terms are such that an ordinarily prudent insurer would accept it, considering the likelihood and degree of the insured‘s exposure to an excess judgment.
See 77 S.W.3d at 262. Thus, the Court engrafts onto the statutory liability standard the Stowers liability standard as necessary elements to prove that the insured‘s liability is reasonably clear and that liability may be imposed.
I agree that
When Rocor sued National Union,
In contrast, the common-law Stowers duty requires insurers to accept reasonable settlement demands within policy limits that an ordinarily prudent insurer would accept, considering the insured‘s potential exposure to a judgment exceeding the policy limits. Garcia, 876 S.W.2d at 848-49. Thus, the Stowers standard does not impose an affirmative duty on insurers until the suing party makes a settlement demand that an ordinarily prudent insurer would accept. See Garcia, 876 S.W.2d at 849. Moreover, under Stowers, the insurer only has a duty to accept a settlement demand if an ordinarily prudent insurer would do so under the circumstances. This purely objective standard differs significantly from the good faith standard that expressly applies to the insurer‘s statutory duty. Indeed, this Court has defined “good faith” differently in other contexts after recognizing that a good faith standard differs from a negligence standard. See, e.g., Wichita County, Texas v. Hart, 917 S.W.2d 779, 784 (Tex. 1996) (holding that “good faith” in the Whistleblower Act context encompasses subjective and objective components); Associated Indem. Corp. v. CAT Contracting, Inc., 964 S.W.2d 276, 285-86 (Tex. 1998) (discussing “good faith” definitions in various contexts); see also
Despite the obvious distinctions between an insurer‘s common-law Stowers duty and
The Court explains that applying the Stowers liability standard to the statutory duty “promotes uniformity and prevents insurers from facing conflicting liability standards.” See 77 S.W.3d at 261. But the Court‘s rationale lacks a firm foundation and instead rests on “sinking sand.” This is because the Court‘s rationale ignores the separate and distinguishable duties an insurer has under the statute and Stowers. And it fails to acknowledge that the statutory duty and Stowers duty clearly serve different purposes.
On the other hand, the Stowers duty mandates that insurers accept a reasonable settlement demand that an ordinarily prudent insurer would accept. Garcia, 876 S.W.2d at 848-49. Whether liability became reasonably clear is of no moment for triggering the Stowers duty. Thus, the Stowers standard protects an insured from litigating a claim that may or may not have merit, but, because of the circumstances, could expose the insured to significant liability that exceeds the policy limits. Indeed, an insured who establishes that an insurer breached the Stowers duty may recover, as a matter of law, the amount in the judgment rendered against the insured that exceeds the applicable policy limits. See, e.g., Allstate Ins. Co. v. Kelly, 680 S.W.2d 595, 606 (Tex. App.—Tyler 1984, writ ref‘d n.r.e.).
Furthermore, the Court‘s holding that the Stowers liability standard applies to the statutory duty flies in the face of this Court‘s statement in Garcia that “breach of the Stowers duty does not constitute a violation of article 21.21 or the DTPA.” Garcia, 876 S.W.2d at 847. The Court attempts to negate this statement‘s importance. But the Court does so only when discussing Garcia‘s impact on whether an insured has an article 21.21 claim for damages it incurred, because its insurer engaged in unfair settlement practice regarding a third party-claim. See 77 S.W.3d at 260. The Court does not, and cannot, explain why this statement from Garcia does not preclude the Court from now conflating the distinguishable Stowers and statutory duties.
Additionally, the Court mischaracterizes my position when it states that, under my view, liability is reasonably clear within the statute‘s meaning if the insured “clearly caused the third party‘s injuries.” See 77 S.W.3d at 262. The Court explains that, under my view, “an insurer could be held liable for failing to settle even if the amount of the injured third party‘s damages were unknown or unclear.” See 77 S.W.3d at 262. This is absolutely incorrect. First, the Court‘s analysis fails to appreciate the distinct difference between liability and damages. No language in the statute suggests that the exact amount of damages due must be reasonably clear before the insured has a duty to attempt in good faith to effectuate settlement. Second, as discussed above, the statute expressly imposes a duty on the insured to take affirmative steps when “liability has become reasonably clear,” while the Stowers duty only requires insurers to accept reasonable settlement demands. The Court claims that its holding that the Stowers liability standard applies to the statutory standard “is consistent with the statutory purpose the dissent identifies, because it is expressly intended to encourage swifter dispute resolution.” See 77 S.W.3d at 262 (citing Garcia, 876 S.W.2d at 851 & n. 18). But this statement wholly disregards that my position encourages dispute resolution even more than the Court‘s holding, because the Court entirely eliminates a separate and distinct statutory settlement duty on the insurer.
In sum, despite the statute‘s unambiguous, plain language, the Court assumes it can carte blanche reinvent the liability standard for violating the statutory duty. Courts must enforce laws as the Legisla
B. JNOV REVIEW
There is more than a scintilla of evidence to support the jury‘s conclusion that National Union failed to attempt in good faith to effectuate a prompt, fair, and equitable settlement once liability became reasonably clear. See Exxon Corp., 726 S.W.2d at 19; Dowling, 631 S.W.2d at 728; Dodd, 576 S.W.2d at 814. There is evidence that the attorneys for Rocor and National Union agreed, from very beginning, that the suit exposed Rocor to significant liability. Further, in January 1990, National Union advised Rocor that liability would likely reach the excess insurance coverage it provided. From that time, National Union decided it would take over the settlement efforts. And there is evidence that one year before the settlement, National Union‘s attorney assessed liability at almost exactly the amount for which the case eventually settled. Consequently, there is evidence to support the jury‘s finding that liability became reasonably clear as the statute requires to establish an insurer‘s liability.
Furthermore, though National Union took over settlement negotiations once it acknowledged Rocor‘s liability would trigger the excess policy coverage, National Union halted mediation efforts after it assumed settlement authority. And, then, National Union made settlement offers in amounts significantly below the assessed liability. In fact, National Union‘s first settlement offer reflected that National Union would not have to pay any money, because Rocor‘s other insurers would have covered the smaller amounts National Union offered. Moreover, there is evidence that Rocor‘s defense attorney advised Rocor and National Union that detrimental evidence existed, and thus, National Union should quickly settle to avoid defense costs. National Union‘s attorney acknowledged that National Union benefitted from the delayed settlement because it continued to earn interest on investments. Assuming the good faith standard encompasses both an objective and subjective element, this evidence supports a jury finding that National Union lacked both. And, though no ideal time period in which parties must reach settlement exists, there is evidence that Rocor incurred legal expenses to prepare for trial because National Union delayed settling long after liability became reasonably clear. Therefore, viewing all the evidence in a light most favorable to Rocor, the jury could conclude that National Union failed to attempt in good faith to effectuate a prompt, fair, and equitable settlement. See Mancorp, 802 S.W.2d at 228.
There is more than a scintilla of evidence to support the jury‘s conclusion that National Union violated the statutory duty article 21.21 clearly establishes. Consequently, the trial court erred in granting the judgment notwithstanding the verdict. See Mancorp, 802 S.W.2d at 228; Exxon Corp., 726 S.W.2d at 19; Dowling, 631 S.W.2d at 728; Dodd, 576 S.W.2d at 814.
C. OTHER ISSUES AND DISPOSITION
1. ELECTION OF REMEDIES
Rocor pleaded more than one recovery theory. But under the election-of-reme-
2. CHARGE ERROR
National Union argues that, even if the Court concludes that Rocor has a statutory claim, it should remand the case for a new trial based on the alleged erroneous jury charge. National Union contends that the broad-form liability question submitted two unfair deceptive act theories—misrepresentation and unfair settlement practice—and the misrepresentation theory is legally invalid.
But National Union did not object to the charge on the basis that it included an invalid legal theory. Instead, National Union argued only that Rocor lacked standing to maintain a claim under article 21.21 for unfair settlement practices. A party‘s objection to the charge must be timely and specific. Crown Life Ins. Co. v. Casteel, 22 S.W.3d 378, 388-89 (Tex. 2000). Accordingly, National Union did not preserve its argument that the broad-form liability question improperly submitted an invalid legal theory. See
However, National Union did object to the trial court‘s submitting the misrepresentation theory because it lacked an evidentiary basis. Applying a traditional harm analysis, I conclude that the record—including the pleadings, the evidence, and the entire charge—does not demonstrate that the unsupported misrepresentation theory probably caused rendition of an improper judgment or prevented National Union from properly presenting the case on appeal.
3. ATTORNEY‘S FEES
When Rocor sued National Union, article 21.21 section 16 permitted, as it does today, a plaintiff to recover reasonable and necessary attorney‘s fees. See
While Rocor‘s appeal was pending in the court of appeals, we decided Arthur Andersen & Co. v. Perry Equipment Corp., 945 S.W.2d 812 (Tex. 1997). In that case, we held that a plaintiff seeking attorney‘s fees under the DTPA must prove the attorney‘s fees were reasonable and necessary to the case‘s prosecution and must ask the jury to award the fees in a specific dollar amount, not as a percentage of the judgment. Arthur Andersen Co., 945 S.W.2d at 818-19. Consequently, National Union argued in the court of appeals that Arthur Andersen applied to preclude Rocor‘s recovering the percentage attorney‘s fees awarded.
To preserve a complaint for appellate review, an appellant must object and ob-
4. DISPOSITION
Rocor has a cognizable claim under article 21.21 section 16 for unfair settlement practices, and the evidence supports the jury‘s liability finding on this claim. Additionally, Rocor has elected to recover under this theory, which affords greater relief than the negligence theory the court of appeals upheld. Thus, the Court should reverse the court of appeals’ judgment and remand the case to the trial court to enter judgment consistent with the jury‘s verdict and the applicable statute.
III. CONCLUSION
Today, the Court combines two distinct duties for insurers—one from the common law and the other from a statute—to create a cause of action that exists neither in the common law nor in the statute. In doing so, the Court ignores the statute‘s plain meaning, engrafts language into the statute that does not exist, and refuses to give effect to the Legislature‘s intent. Well over one hundred years ago, this Court recognized the long-standing rule: “It is the duty of a court to administer the law as it is written, and not to make the law.” Turner v. Cross, 83 Tex. 218, 18 S.W. 578, 579 (1892). This legislative act from the bench eviscerates the statutory claim. Accordingly, I dissent.
Notes
(10) Unfair Settlement Practices.
(a) Engaging in any of the following unfair settlement practices with respect to a claim by an insured or beneficiary:
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(ii) failing to attempt in good faith to effectuate a prompt, fair, and equitable settlement of a claim with respect to which the insurer‘s liability has become reasonably clear.
Id. at 844.